Tax collections drop along with energy activity

Phil Castle
Phil Castle

Phil Castle, The Business Times

Sales and use tax collections continue to drop in the Grand Valley in what local officials attribute to a combination of factors, chief among them a slowdown in the energy sector.

The City of Grand Junction reported a 6.1 percent decrease in combined sales and use tax collections in June compared to the same month last year. Mesa County reported an 8.2 percent drop, the biggest monthly proportional decline in nearly four years. June collections reflect May sales.

Sales tax collections constitute not only an indicator of the local economy, but also a significant source of revenue for local governments. Declining collections affect budgeting and spending.

Through the first half of 2016, city sales and use tax collections have retreated on a year-over-year basis in four out six months. County collections have declined for all but one month.

Jodi Romero, financial operations director for the city, attributed the trend to what she said were a combination of factors, starting with lost wages from layoffs in the energy sector related to low oil and natural gas prices. “I think we’re still struggling in that area.”

In addition, local consumers have been a little more conservative in their discretionary spending, Romero said. “I think there’s caution out there.”

Meanwhile, Romero said she suspects there’s been an increase in online sales for which the city collects no tax.

Eleanor Thomas, Mesa County budget manager, attributed the latest decline in county collections in part to the comparison with what were unusually large collections in June 2015 that included a $78,000 audit addition and $77,000 in a one-time payment on a large purchase by a manufacturer.

More generally, though, the decline also reflects the effects of slowing in exploration and production for oil, natural gas and coal, Thomas said.

For June, the city reported collecting a total of almost $4 million in sales and use taxes. That’s a decrease of nearly $260,000 and 6.1 percent from the same month last year. Sales tax collections fell 2.1 percent. Use tax collections, a smaller and more volatile portion of revenue, fell 72.1 percent.

For the first half of the year, the city collected a total of more than $24.4 million. That’s a decline of nearly $476,000 and 1.9 percent over the first half of 2015. Sales tax collections actually edged up two-tenths of a percent. But use tax collections dropped 41.8 percent.

Mesa County reported collecting a total of almost $2.6 million in sales and use taxes in June. That’s nearly $230,000 and 8.2 percent less than the same month last year. Sales tax collections fell 7.8 percent, while use tax collections fell 11.3 percent.

County tax collections were down on a year-over-year basis 4.6 percent on retail sales and 9.3 percent on sales in other industries. Taxes collected on sales in the oil and gas sector dropped almost 81 percent.

Taxes collected on automotive sales, which account for the bulk of county use tax revenues, were down 13.3 percent.

For the first half of the year, the county collected slightly more than $15 million in combined sales and use taxes. That’s down  more than $719,000 and 4.6 percent from the first half of 2015. Sales tax collections were down 3.5 percent, while use tax collections declined 14.4 percent.

While the year is only half way over, city and county budgets and spending will be adjusted to reflect decreased tax revenues, Romero and Thomas said. Depending on what happens during the second half of the year, budget projections for 2017 revenues also could be changed, they said.